BOISE – Since Idaho temporarily raised its cigarette tax two years ago, the states surrounding it have upped theirs to the point that Idaho’s 57 cents a pack is the lowest in the region.
Now, Idaho’s tax is scheduled to drop back down to 28 cents a pack this summer. Gov. Dirk Kempthorne doesn’t want it to, and some lawmakers agree. Anti-smoking activists say the higher rate helps keep kids from smoking and helps persuade adults to quit.
But the governor’s plan to use future cigarette tax proceeds to finance state building repairs and renovation – including a long-planned renovation of the state Capitol – is raising objections among lawmakers and activists.
“I guess I’m not ready at this point to say it’s a done deal one way or the other,” said House Tax Chairwoman Dolores Crow, R-Nampa. “But I would hope we could find money to fix this beautiful building some other way.”
The debate over the cigarette tax focuses on two different aims: Idaho looks to its cigarette tax both to discourage smoking and to generate money. In some ways, the two goals conflict, because if fewer people smoke, there will be fewer sales to generate taxes.
“How can we have it both ways?” asked Rep. Jim Clark, R-Hayden Lake, who serves on the House Revenue and Taxation Committee and opposes the higher tax.
Crow said she’s never liked the idea of using “sin taxes” to generate money for government, because a small group is targeted to pay for services that go to everyone.
“If you discourage consumption, then your funds go down, and where are you then?” she asked.
But House Minority Leader George Sayler, D-Coeur d’Alene, said, “It probably should be higher.”
“I would probably like to increase it a little more to keep us competitive with other states,” he said. “There’s less smoking, and that’s good.”
American Heart Association lobbyist Mary T. MacConnell said that since Idaho raised its tax, the number of packs of cigarettes sold in the state has dropped 12 percent. “If you increase the price, fewer people smoke,” she said.
But MacConnell opposes the governor’s proposal: She’d rather see the money go to anti-smoking programs than to buildings.
“It’s a health issue,” MacConnell said. “I have nothing against the permanent building fund, but we need to do more prevention in this state. … I just would like to see more money invested in health.”
Idaho’s cigarette tax traditionally has been divided among the state’s general fund, its permanent building fund, a public school anti-drug program and county juvenile probation services. A small amount goes to a cancer control fund and a tumor registry.
When lawmakers agreed to raise the tax two years ago, Kempthorne asked them to do so permanently, but the Legislature signed on only for a two-year increase. That’s the same time frame lawmakers agreed to for a temporary sales tax increase to help balance the state’s budget.
“The Legislature made two promises, two expiration dates for two different taxes, and you’re going to lift one and keep the other?” Crow said. “I don’t think that’s quite right. It’s kinda being honest only where you want to be.”
But unlike for the sales tax increase, there’s fairly broad support for keeping Idaho’s cigarette tax at the higher rate, especially because it’s now the lowest among surrounding states. And the state raised an additional $22.1 million the first full year of the tax increase.
“We want to see this tax stay at least at 57 cents,” said Brad Hoaglun, director of government relations for the American Cancer Society. “The cost of cigarettes has a lot to do with how many people start smoking. The higher it is, the less likely they’ll start, and the more likely they’ll quit.”
In the November election, Montana voters raised their cigarette taxes by $1 a pack and earmarked all the additional money for health programs. That measure passed with 63 percent of the vote. At the same time, Colorado upped its tobacco tax by 64 cents a pack, with that money earmarked for health programs. That garnered 61 percent of the vote. Washington’s cigarette tax is now more than $1.42 a pack.
Said Crow, “I don’t care what Oregon does, and I don’t care what Montana does. I care what’s good for our state.”
Proceeds will fall
Kempthorne’s budget director, Brad Foltman, warned legislative budget writers that the cigarette tax increase won’t keep bringing in $20 million a year forever. Instead, smoking will decrease, and the proceeds will fall gradually over time, he said.
Foltman said that’s a good reason to direct the money to the building fund, which pays for one-time projects rather than ongoing state expenses.
Sen. Shawn Keough, R-Sandpoint, vice chairwoman of the Senate Finance Committee, said the building plan surprised her. Keough said she heard discussion among lawmakers in recent months about keeping the higher tax rate and using the $20 million or so a year it generates for projects including funding a settlement of a dispute over southern Idaho water rights and repairing school buildings.
“The permanent building fund wasn’t one (of the ideas),” she said.
Sayler said, “It would be nice if some of the money at least could go to some prevention programs and treatment programs.”
Under the tax increase legislation that lawmakers approved two years ago, the first year’s proceeds from the cigarette tax went to help balance the state budget. The second year’s proceeds are going into a special savings account called the Economic Recovery Reserve Fund.
Kempthorne is calling for using the money from that fund to pay for a budgetary anomaly next year: The state will have a 27th pay period to cover for state employees next year, a situation that occurs only once every 11 years. The fund should generate enough to cover that, with a couple million dollars left over.
“It covers that cost fairly neatly,” legislative budget analyst Jason Hancock said.
Then, starting next year, Kempthorne would use the additional cigarette tax proceeds to pay for building needs including renovating the state Capitol and the old Ada County Courthouse across the street, building a lodge at Ponderosa State Park in McCall, and paying for long-delayed repairs and maintenance at state-owned buildings throughout the state.
“Our work here is an open democracy,” Kempthorne told lawmakers in his State of the State address last week at the Capitol. “Idahoans can visit their capital city to watch their elected representatives in action. But too often, they have to stand in the halls, because there’s no space in a committee hearing room.
“Yet, when they leave this building, they pass by a large, boarded-up structure and they wonder why lawmakers can’t meet there? Utilizing that building will allow more citizens to participate in their government.”
The state acquired the old courthouse, which is right across from the Capitol, several years back, but it hasn’t done anything with it as lawmakers argued over whether to renovate it or tear it down and build anew. Kempthorne’s plan would allow for either option.
MacConnell said the Heart Association is most concerned that Idaho’s cigarette tax will be dropped to its previous level. In the long run, she suggested, that would cost the state money.
“If you lower the price, you’re going to see an increase of usage, and of course that’s going to translate down the line into an increase in medical costs,” MacConnell said.
Added Hoaglun, “We think it should at least stay where it is for now.”